the times | Wednesday January 19 2022 39

CommentBusiness

There are now fewer

older people in work,

especially women

Britain’s own Great Resignation is

skewing its employment figures

A

nother day, another

allegation — and perhaps

another prime minister

sooner rather than later.

For all the gory detail

about suitcases of wine, gin in the

garden and “work events” that look

awfully like lockdown-busting

parties, we must not lose sight of the

fact that replacing Boris Johnson

with another Conservative MP

would be more than cosmetic.

Policy would change with it. For

UK plc, looking at Westminster and

considering the prospect of a fifth

prime minister in little over a

decade, understanding this upheaval

is more important than waiting for

Sue Gray or the men in grey suits

who could trail in her wake.

To break down what it might

mean, we first need to understand

what could be called “Johnsonism”,

should his premiership survive long

enough to earn that title. At the root

of it is the idea of an active central

state that uses post-Brexit powers to

intervene more thoroughly in the

economy: first, to “level up”

opportunity outside London and the

southeast; second, to set the

economy on a path to net zero by

2050. The two key obstacles to
      delivering on these goals have been
      unpicking the Brexit deal that
      Johnson signed to facilitate the UK’s
      exit from the European Union, and
      tackling the significant interruption
      caused by the pandemic.
      So what is the prospect for each of
      these issues in the hands of Rishi
      Sunak, Liz Truss — or even a
      weakened Johnson who manages to
      hold on in Downing Street?
      On Covid, the path is clearly set.
      Falling case numbers and falling
      consent for even preventative plan B
      measures mean that the vast
      majority of restrictions will be
      scrapped when they are reviewed
      this month. It would take a variant
      of vicious severity and
      transmissibility to reintroduce
      measures under any Conservative
      prime minister, not just Johnson.
      On Brexit, we should expect
      circumstances to constrain the
      instincts of either Johnson or his
      successors. Any prime minister will
      struggle to invoke Article 16 to
      resolve the Northern Ireland border
      issue. Conservative MPs will not
      support it en bloc, as would be
      necessary, and the Treasury will
      argue strongly against, for fear of

needing to pick up the pieces if a

trade war shaves points of GDP off

its forecasts. A Truss or Sunak

administration may spend more

time than Johnson emphasising free

trade deals or regulatory innovation

as a consequence of Brexit, but both

also would have to devote valuable

effort and capital to landing the

domestic politics of each in order to

have any success.

More variable are the prospects

for net zero and levelling up. While

net zero has been used as a rallying

cry for middle-class remainers to get

behind Johnson’s agenda, it is likely

Sunak or Truss would take a more

sceptical view of the regulatory

burdens it places on businesses and

families already struggling to cope

with pandemic-induced inflation.

Where action on climate change

can be combined with repairing the

nation’s finances post-Covid, it is

likely to happen. But do not

overestimate the political will for

challenges such as decarbonising

home heating in the near term.

Levelling up, too, will require

significant effort to translate

laudable aims into reality. In the

next fortnight Johnson will use the

publication of a long-delayed white

paper to define what the slogan

means in policy terms. But the

generational transformation of local

economies it promises will require

years of work and depends more on

who occupies Downing Street in the

second half of this decade than

who’s in place at the end of this year.

This points to a wider truth about

“Johnsonism”. Like all politicians’

legacies, its success is largely in the

hands of his successors. Sunak,

Truss or any other Conservative who

follows Johnson is likely to largely

respect its contours. The worry for

all of them should be that the events

of recent weeks makes a Keir

Starmer premiership, possibly at the

head of a minority government,

more likely. In that event, Johnson’s

legacy is going to look very

different, indeed.

David Smith

Alex Dawson

The latest

unemployment

figures are, on the

face of it, very good.

The unemployment

rate of 4.1 per cent is only fractionally

above pre-pandemic levels,

demonstrating that fears of a jobless

surge after the furlough scheme

ended on September 30 were

misplaced.

The furlough scheme has been a

great, if expensive, success and credit

is due to Rishi Sunak and the advisers

and officials who designed it. The

Bank of England, which delayed an

interest rate rise in November because

of worries about a post-furlough

jobless rise, instead raising rates amid

the Omicron surge in December,

covered itself in rather less glory.

Nor, to judge from the latest PAYE

data from HM Revenue & Customs,

was Omicron particularly damaging

to the jobs market. There was a rise of

184,000 in the number of payrolled

employees last month for an increase

of more than 1.3 million, or 4.8 per

cent, compared with a year earlier. On

this measure, the number of

employees was 1.4 per cent, or

409,000, higher than pre-pandemic

February 2020. As I shall explain, that

does not mean there are more people

in work.

Before that, I would be failing in my

“I told you so” duty if I did not point

that growth in pay has slowed sharply.

A few months ago, when average

earnings growth touched 9 per cent

and Boris Johnson was declaring a

new high-wage era, I wrote that the

figures were hugely distorted by

furlough and compositional effects

and that earnings growth would be

down to 3 per cent or 4 per cent by

the end of the year. Sure enough, in

November both total and regular pay

was rising by 3.5 per cent on

a year earlier. Not for the

first time, the prime

minister, who is

likened by his

former chief

adviser to a

shopping trolley,

suffered from

wonky wheels;

3.5 per cent pay

growth alongside

5.1 per cent

inflation means, of course, that real

wages are falling again.

As for the bigger jobs’ picture,

ministers have taken to proclaiming

that there are more people in work

than there were before the pandemic.

That is simply untrue. In the latest

overall employment figures, the total

number of people in work in the

September-to-November period was

almost 600,000 — 598,000 — lower

than in December 2019 to February

2020, the eve of the pandemic.

This is because of a collapse in self-

employment, which has fallen by

815,000, or 16 per cent, to just over

4.2 million compared with pre-

pandemic levels. For those who see

self-employment as a proxy for the

country’s entrepreneurial spirit, this is

a disturbing development.

What appears to have happened is

that, despite the self-employment

income support scheme that

accompanied furlough for employees,

some people have dropped out of self-

employment completely while others

have opted for the security of

employment, particularly those who

did not qualify for support.

You may ask why, with this big fall

in the overall number of people in

work, is the unemployment rate, at

4.1 per cent, so low? The answer is

that the workforce is a lot smaller

than it was.

There was a time when it was

thought that the big reason for this

was an exodus of European Union

workers after Brexit. The Office for

National Statistics is still trying to get

to the bottom of what has happened

in terms of foreign workers in Britain

and it suspended its regular

publication on this in February 2020.

But the broad picture it offers is that a

drop of 150,000 to 200,000 in the

number of EU workers has been more

than offset by an increase in

workers from Africa, India

and other parts of the

world.

How this pans out

remains to be seen,

but EU migrants

tend to have a

higher

employment rate

— a bigger

proportion of them

are in work — than

those from the rest

of the world. The

latest official population

projections suggest that all

of the UK’s population growth and

more over the next ten and twenty-

five years will be directly due to

immigration.

If a falling workforce is not because

of a foreign worker exodus, which the

ONS’s figures imply, it must be

something else. In America, there has

been a lot of talk in recent months

about the Great Resignation — of

people resigning from their jobs

during the pandemic, sometimes for

another job and sometimes to drop

out of the job market entirely, because

the virus made them reassess their

priorities. These things are also

happening in Britain. More people are

changing jobs and more are dropping

out. Economic inactivity — people

who are not in work and not looking

for it — is up by more than 400,000

and is rising again now.

The Institute for Employment

Studies has been very good at

monitoring this and notes that there

are 1.1 million fewer people in the

labour market now than if pre-

pandemic trends had continued.

Roughly 60 per cent is down to fewer

older people in work, particularly

older women. Until the pandemic, the

rise in the number of older women in

work, partly because of pension

changes, had been a key feature of the

jobs market. There also has been an

increase in people out of work

because of long-term ill-health, the

highest since 2004, though whether

this is directly related to Covid is

unclear.

For these reasons, the low

unemployment rate is probably not a

very good measure of the health of

the labour market. As Tony Wilson,

director of the IES, puts it: “Despite

record levels of vacancies and

unprecedented demand, employment

is unchanged on the figures reported

last month while economic inactivity

appears to be rising. With nearly as

many vacancies as there are

unemployed people, employers are

facing the tightest labour market in at

least 50 years, with labour shortages

now holding back our recovery... We

need a new ‘Plan for Jobs’ that will

raise participation

and tackle the

recruitment crisis.”

It is hard to argue

with that.

‘‘

’’

David Smith is Economics Editor of

The Sunday Times

[email protected]

Alex Dawson is the practice lead, UK

politics and policy, at Global Counsel

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